October Fuel Price Update

Diesel leads the way as pump prices rise

21 October 2010

Petrol and diesel prices across the UK have risen substantially following four months of falling prices over the summer. On average, diesel is up 3.28p a litre over the past month with petrol 2.5p more expensive, according to the latest AA Fuel Price Report.

The 1.2p-a-litre increase in fuel duty + VAT on 1 October has combined with rising oil prices ($78 to $85 a barrel in early October) to push average petrol pump prices up from 115.25p in mid September to 117.75 in mid October. In the same period, diesel has gone up from 118.02p a litre to 121.30.

Although both the value of oil and wholesale petrol prices have threatened to hit the April highs (respectively $87 a barrel and $809 a tonne) that pushed UK average petrol pump prices to the all-time record of 121.61p a litre, a stronger pound has reduced the impact by about 2p a litre. On Monday, the price of oil fell by more than $2 a barrel and wholesale petrol prices had retreated to around $775 a tonne – once again undermining predictions of new record petrol prices in the coming weeks.

Refinery disruption in France may have helped to increase the price of diesel, although the wholesale price of French diesel fell 3% on Tuesday. October, however, traditionally sees diesel prices start to rise as US demand for winter heating oil grows. UK diesel drivers will be concerned that the price differential between petrol and diesel has widened to 3.55p a litre for the first time since early June 2009.

For UK families trying to digest the impact of government cuts, this month's £1.25-a-tank increase in petrol costs has added £5.30 to the monthly fuel spend of a two-car household. Government petrol consumption figures, released at the end of September, showed that retail sales in the second quarter of this year were down 5.8% compared to the same period last year. Supermarket sales dropped 6.2%, other retailers' fell 5.5%.

The price gap between the North and South closed to 1.1p (NW/NE/Yorks&Humbs 117.1p, SW/SE/London 118.2p), a significant improvement on the 2p difference during the summer. London remains the most expensive region for petrol, averaging 118.4p a litre, with Yorkshire and Humberside cheapest at 116.8. Wales has become the dearest region for petrol at 122.2p a litre while Yorkshire and Humberside enjoy the lowest average price of 120.6

Comment

Edmund King, AA president said: "This month's £1.25-a-tank increase in petrol costs has added £5.30 to the monthly fuel spend of a two-car household at a time when most motorists can least afford it. 93% of passenger journeys are by road so these increases are hitting the vast majority of the population. Price hikes will be felt this weekend as record numbers take to the roads for the half-term getaway.

" Fuel protests in France may continue, or support may wane as supermarkets run out of food, people can't get to work and the vulnerable can't get help – a lesson learnt by the UK in 2000. Whichever way, the impact on UK fuel prices is far from certain as this week's falls in oil and wholesale prices have shown.

"All the same, this month's fuel price rises will put pressure on families and inflation targets, although the Government must be keeping its fingers crossed for a stronger pound and less speculation in the oil and fuel markets as it tightens the financial screw."